By Masayuki Kitano
TOKYO, April 23 (Reuters) - The euro held near a record high
against the dollar on Wednesday due to its yield advantage,
while the Australian dollar climbed to a 24-year peak versus the
U.S. currency on data showing a jump in core inflation in
Australia.
While the euro trimmed some gains after climbing above
$1.6000 on Tuesday for the first time since its 1999 inception,
it seemed poised to rise further given the outlook for U.S. and
euro zone interest rates, traders said.
"While the euro might not rise rapidly, it will probably
stay on a solid footing," said the head of foreign exchange
sales for a U.S. investment bank in Tokyo.
"The market's theme is inflation. Currencies of countries
that have expressed concerns about inflation are being bought
while currencies of countries that will likely have a hard time
raising interest rates have been weak," he said.
The euro was steady at $1.5995 <EUR=> after rising to
$1.6002, just short of an all-time peak of $1.6020 hit on
electronic trading platform EBS on Tuesday.
The euro was also holding at 164.80 yen <EURJPY=R>, hovering
near a four-month high of 164.94 yen hit on EBS on Tuesday.
The dollar held steady near 103.00 yen <JPY=>, having pulled
back from a seven-week high of 104.66 yen hit late last week.
The Australian dollar climbed to a 24-year high of $0.9517
<AUD=D4> after data showed that core inflation in Australia
accelerated to its fastest pace in nearly 17 years last quarter.
The rise in core inflation was higher than many had expected
and suggested that Australian interest rates would remain at a
12-year high of 7.25 percent for some time. []
Traders said there was limited reaction to a Wall Street
Journal report that quoted European Central Bank Governing
Council member Christian Noyer as saying that markets had read
too much into his comments on interest rates on Tuesday.
[]
EURO'S YIELD ADVANTAGE
The euro's rally on Tuesday had been stoked by remarks by
European Central Bank officials, including Noyer's comments in
an interview with French radio network RTL, that stirred talk
that the ECB's next move may be to raise interest rates.
But Noyer later said markets had misinterpreted his remarks
as a hint on the direction in which interest rates might move,
the WSJ reported in its online edition.
"I would never engage in a discussion about the future path
of interest rates, simply because nobody knows. It would be
dangerous to make predictions in either direction," the WSJ
quoted Noyer as saying.
The European Central Bank is expected to keep interest rates
on hold at 4.0 percent for a while, in contrast to the U.S.
Federal Reserve, which is expected to lower interest rates from
the current 2.25 percent later this month. <FEDWATCH>.
The euro has also been supported by the recent jump in crude
oil prices, which hit a record high on Tuesday <CLc1>,
underscoring market expectations that the ECB would need to stay
vigilant on inflationary pressures.
"As long as the trend of rising oil prices stays, the euro
looks set to go further up, given that the surge in oil could
further hurt the U.S. economy and therefore the dollar," said
Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ
Trust Bank.
One caveat is possible jawboning by euro zone officials
against the euro's rise, traders said.
"There is the question of how much European authorities will
be willing to accept," said the head of foreign exchange sales
for a U.S. investment bank, referring to the euro's strength,
adding that this point bears watching given the differences in
economic fundamentals among countries within the euro zone.
(Additional reporting by Satomi Noguchi; Editing by Hugh
Lawson)
